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Retail sector showing signs of revival

| Economic factors

A study by the Bureau of Economic Research (BER) has shown that the retail sector showed signs of a revival in the last three months of the year after the sector ran into trouble in the third quarter of the year.

The BER said sentiment in the sector was improving.

 BER said business confidence among retailers improved somewhat following the significant deterioration recorded in the third quarter of 2018

"Confidence was supported by higher sales volumes and a slight improvement in overall profitability. However, trading conditions remain tough with no meaningful pick-up expected over the festive season," BER said. 

The battered consumer confidence in South Africa has underwhelmed the retail sector and other consumer services sectors as the economy blew hot and cold this year.

The FNB/BER Consumer Confidence Index released last month showed that sentiments amongst consumers deteriorated substantially during the third quarter of 2018, with the index from 22 in the second quarter to 7 in the third quarter.

 The South African Chamber of Commerce and Industry last week said the year-on-year decline in the all-share price index of the JSE, higher inflation, lower precious metal prices, and stagnant real retail sales weighed the most negatively on the business confidence index in November.

Retailers have this year had contented with many headwinds as the economy punched below its weight.  The first hike in the value-added tax 25 years that came into effect in April also hamstrung the sector while a surge in fuel prices also saw consumers cut their spending.

Andrew Golding, chief executive of the Pam Golding Property group said news that South Africa’s economy grew in the third and a considerable reduction in fuel meant consumers ended the year on a positive note.

“The weak exchange rate, together with higher global oil prices, has taken its toll on household finances this year as consumers have endured a series of fuel hikes, not to mention the recommencement of load-shedding by Eskom - something we hoped was a thing of the past, plus ongoing tariff hikes,” Golding said.

Confidence amongst chief executives in the consumer services has also plummeted in the fourth quarter.  The Merchantec CEO Confidence Index released last recorded a 4 percent decrease in chief executive sentiment in the fourth quarter of 2018 to a score of 49.0 which is just below the neutral scoreline of 50 points.

Sentiment amongst consumer goods consumers decreased by 21.5 percent, moving to a score of 50.80 points, while consumer Services remained flat at 40.25 points.

The woes facing the sector was highlighted by the latest retail sales figures released by Statistic South Africa which showed reported a muted 0.7 percent rise in year-on-year retail sales for September.


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